July 31, 2006

CBOT Corn Outlook on Monday: Up 2-3 cents, as market adds weather premium

Corn futures are predicted to begin trading 2-3 cents higher Monday at the Chicago Board of Trade as higher prices overnight and continued hot and dry conditions in much of the U.S. Midwest are expected to boost values at the opening, sources said.

In overnight e-CBOT trading, September corn rose 2 3/4 cents at US$2.40 per bushel and December also gained 2 3/4 cents to US$2.56 1/4.

Corn was higher overnight in active trading as market participants added some weather premium back in, said Don Roose, president of US Commodities in West Des Moines, Iowa.

There is a lot of uncertainty over yields with expected yields holding their own at best and probably sinking a bit on the weather, versus a back drop of continued strong demand, he said.

The heat pattern remains the same over the next few days before it cools down and rainfall is expected to enter the region midweek, he added.

Hot and dry weather currently over the central U.S. is expected to move off to the south and east over the next several days with cooler temperatures and thunderstorms predicted to develop in the U.S. Midwest, especially in some of the dry western areas, DTN Meteorologix Weather said.

In the western U.S. Midwest, temperatures are expected to remain above to much-above normal over the next 48 hours with highs remaining in the 90s to low 100s Fahrenheit. Scattered showers and thunderstorms develop on Tuesday and Wednesday and continue into Thursday. Rainfall totals are expected to be .50-1 inch and locally heavier.

In the 6-to-10 day outlook for the region, temperatures are forecast near to above normal with rainfall near to below normal, DTN Meteorologix Weather said.

In the eastern U.S. Midwest, temperatures are predicted to remain above to much-above normal in the next 48 hours with highs in the middle 90s F to low 100s F. Dry conditions or a few light showers are expected on Wednesday with periods of scattered showers and thunderstorms on Thursday and Friday with amounts of .25-1 inch and locally heavier, DTN Meteorologix Weather said.

In the 6-to-10 day forecast, temperatures are expected near to above normal and rainfall near to below normal.

The market will also be cautious ahead of the weekly crop conditions report this afternoon Roose said. East of the Mississippi could be steady with conditions west of the Mississippi down 1-2 percentage points in the good-to-excellent category. Overall conditions could be down 1-2 percentage points from last week, he added.

Large non-commercial traders increased their long corn futures and options on corn futures positions by 8,258 contracts, and their short positions by 7.237 contracts and are now net long 212,747 contracts as of July 25. Meanwhile, large commercial traders reduced their short futures and options on futures positions by 3,110 contracts and increased their long positions by 1,882 contracts and are now net short 96,184 contracts as of July 25, the Commodity Futures Trading Commission reported Friday.

On technical charts, US$2.51 is still strong technical support in December corn, but a close below that level would cause more chart damage, a technical analyst said. The bear's next near-term downside objective is the June low of US$2.47 3/4, with the next upside price objective is closing prices above the near-term high of US$2.60 3/4, he added. First resistance is seen at US$2.56, Friday's high and then at US$2.58. First support is pegged at Friday's low of US$2.53 and then at US$2.51.

Cash corn basis bids were mixed Monday morning. Central Illinois was 3 cents lower at 13 cents under the September future.

In other corn news, prices for corn delivered to Asia are likely to remain flat in the week ahead as traders look to changes in ocean freight rates and the influence U.S. weather has on futures prices in Chicago for cues, market participants said Monday.

Corn futures on China's Dalian Commodities exchange settled higher, with May 2007 up RMB/6 at RMB/1,421/tonne.

The USDA is scheduled to release the weekly export inspections report at 10 a.m. CDT and the weekly crop conditions at 3 p.m. CDT.